Capital Gains Tax in Spain: Essential Guide for Non-Residents

For non-residents in Spain, navigating Capital Gains Tax (CGT) when selling a property can be a complex process, however, we’re here to simplify it.

 

Understanding what costs you can deduct, the timing of payments, and the current tax rate are all vital in ensuring you fulfil your tax obligations correctly and optimise your financial outcome. Our guide will break down what you need to know about CGT in Spain, particularly if you’re a non-resident.

 

What is Capital Gains Tax in Spain?

 

Capital Gains Tax is levied on the profit made from selling assets, such as property. In Spain, non-residents are subject to CGT on the sale of Spanish property at a flat rate. This is calculated as the difference between the sale price and the original purchase price, factoring in deductions which we’ll go through below.

 

 

How Much Capital Gains Tax Do Non-Residents Pay?

 

The current CGT rate for non-residents selling property in Spain is set at 19%. This rate applies exclusively to non-residents, regardless of their country of origin. For residents, however, CGT is progressive, with different rates depending on the profit made.

 

Deductible Expenses to Reduce Your Taxable Gain

 

Certain expenses incurred during the purchase and sale of a property are deductible, which can help reduce the tax base on which CGT is calculated. Here’s a list of the main deductible expenses:

 

• Notary and land registry fees: These are usually only deductible if they were incurred when purchasing the property.
• Lawyer fees: Deductible when associated with both the purchase and sale of the property.
• Estate agent fees: Commissions on the sale can be deducted.
• Taxes paid during purchase and sale: The transfer tax (Impuesto de Transmisiones Patrimoniales or ITP) if applicable, or VAT (IVA) for new properties, can be deducted from the purchase. Additionally, the Plusvalía Municipal tax paid on the sale of the property can be deducted.
• Property improvements: This category can be a bit tricky. While the Spanish tax authority is strict about distinguishing between simple renovations and value-adding improvements, extensions like building a pool or a terrace may qualify as deductible, especially if backed by official planning permission.

 

Something to note: routine renovations, such as repainting or updating a bathroom, generally do not qualify as deductible, as they are considered maintenance rather than enhancements that add significant value.

 

 

When Do You Need to Pay Capital Gains Tax?

 

After the sale of a property, non-residents have four months from the date of sale completion to submit their CGT declaration and pay any tax due. Meeting this deadline is crucial to avoid penalties or interest.

 

Do You Have to Pay CGT in Your Home Country?

 

In some cases, you may be liable to pay CGT in your country of residence, depending on its tax laws. To avoid double taxation, Spain has tax treaties with many countries, including the UK. However, consulting a tax professional in both Spain and your home country is wise to understand any cross-border tax obligations or credits that may apply.

 

How to Manage Capital Gains Tax as a Non-Resident

 

1. Make sure to plan ahead for renovations and improvements: Ensure you have proper documentation, permits, and receipts for any significant property enhancements you wish to claim as deductions.

 

1. Understand tax treaty benefits: Check with your home country’s tax authority or a tax advisor to see if there are bilateral treaties to help avoid double taxation on your gain.

 

1. Seek professional guidance: Spanish tax law, especially for non-residents, can be intricate, and consulting with an expert can help you make the most of your deductions and comply with all tax regulations. 

 

Selling a property in Spain as a non-resident comes with specific tax responsibilities. While the CGT rate is a flat 19%, being aware of the deductible expenses and the timing of payments can significantly impact your tax bill. With good preparation and expert guidance from Villa Contact, you can navigate Spain’s Capital Gains Tax efficiently, keeping your finances and compliance on track.

 

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